As you are aware, section 12 of Insurance Act 1938 prescribes that all insurance companies must be Audited annually by the Auditors. Regulation 3(4) of IRDA (Preparation of Financial Statements and Auditors Report of Insurance Companies) Regulations 2002 provides that “The Authority may, from time to time, issue separate directions/guidelines in the matter of appointment, continuance or removal of auditors of an insurer or reinsurer, as the case may be, and such directions/guidelines may include prescriptions regarding qualifications and experience of auditors, their rotation, period of appointment, etc., as may be deemed necessary by the Authority”.

The Authority has also been maintaining a panel of auditors based on the applications received consequent to the circular issued by the Authority in February 2001 on the qualification, rotation etc., and advised insurers to appoint auditors from the above list available in the website.

The procedure for maintaining a panel of auditors has been reviewed in the light of (1) the constraints in verifying and processing the applications received from Chartered Accountant firms for inclusion of their names in the panel and (ii) the need to provide more opportunities to the eligible audit firms. The revised guidelines are accordingly issued herewith in supersession of earlier circular issued in February 2001 and the main features of the proposals are as under :-

(I) It has been decided that the Authority would not maintain henceforth a panel of auditors and instead prescribe the requirements to be satisfied by the Chartered Accountant Firms for appointment of Statutory Auditors. The qualifications and other requirements of the intending auditors are detailed in the enclosure.

(II) Consequent to (I) above, the insurance companies would be responsible for selection of audit firms that satisfy the eligibility criteria set by the Authority. The audit firms selected by the company should submit the information to the Insurance company in the prescribed form along with certificates from ICAI/ by way of self declaration confirming (a) constitution of the firm and (b) absence of any pending disciplinary cases against them.

(III) Insurance companies should verify to their satisfaction the eligibility criteria before considering/approving their appointment.

(IV) Any change in the constitution of the firm/information submitted/certifications submitted should be duly informed by the Audit firm to the Insurance Company within one week of such change.

(V) Insurance Companies are required to intimate to the Authority, the name and address of the audit firms, for information within one week of their appointment. If it comes to the notice of the Authority that the appointment is not in line with the prescriptions/information furnished by the Audit firm, the appointment is liable for cancellation and it is open for the Authority to consider such further action as may be deemed necessary in this context.

These revised guidelines will be applicable commencing from the financial year 1st April 2006.



(C.R. Muralidharan)
Member